This Participation Accord describes the commitments that the American Electric Power System (AEP) and the U.S. Department of Energy (DOE) have made to participate in the Climate Challenge Program in pursuit of the President's goal for reducing greenhouse gas emissions. The Climate Challenge Program is a joint, voluntary effort of DOE and the electric utility industry to reduce, avoid or sequester greenhouse gas emissions. The framework of the Climate Challenge Program was established in the Climate Challenge Program Memorandum of Understanding and exhibits thereto dated April 20, 1994 (the Climate Challenge Program MOU) (see Attachment A to this Participation Accord).

I. AEP Commitments

A.
Consistent with paragraph II.B.1 (a and f) of the Climate Challenge Program MOU, AEP will undertake the following programs, projects and actions to reduce, avoid or sequester greenhouse gas emissions:

- Fossil power plant efficiency improvement program
- Adjustable speed drive motor pilot program
- Transmission & distribution system efficiency improvement program
- 415 MW coal to natural gas conversion project
- Hydroelectric facilities refurbishment program
- Nuclear plant availability and capacity increase
- Demand side management program
- Green Lights program participant
- Enhanced forest management and tree planting program
- Increase sales of fly ash to cementitious products markets


In addition, AEP will actively promote to its customers the use of electrotechnologies that can result in an improvement in energy efficiency and a reduction in emissions.
Finally, AEP will participate in the following industry-wide Climate Challenge initiatives:

- The Utility Forest Carbon Management Program

	$5,000 initial commitment in 1994


- The Earth Comfort Geothermal Heat Pump Program

	$50,000/year for 5 years initial commitment in 1995


- Envirotech - The Electrotechnology and Renewable Energy Investment Pool



	Up to $5,000,000 initial commitment in 1995


- EV America

	Commitment to purchase EVs, number and cost unknown at this time

A more complete description of these programs, projects and actions is included in Attachment B.

B.

AEP will report annually on activities and achievements under the Climate Challenge Program. Results achieved during each year shall be reported in a clear and understandable manner that is consistent with the guidelines adopted pursuant to subsection 1605(b) of the Energy Policy Act and the climate program accounting protocols in Exhibit B of the Climate Challenge Program MOU. The first such report may include a description of the activities and achievements of AEP prior to its becoming a participant in the Program, expressed on an annual basis to the extent possible.

C.

AEP will confer with DOE on or before January 1, 1998 to evaluate jointly AEP's progress in achieving its Climate Challenge Program goals and to discuss possible adjustments to its voluntary commitments.

D.

The Climate Challenge Program representative for AEP will be:

Dale E. Heydlauff, Vice President - Environmental Affairs
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215


AEP agrees to notify DOE prior to or, in any event, no later than 30 days after any change in the contact.

II. DOE Commitments

A.
DOE's commitments to AEP are those set out in section III of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.

B.

DOE will consider AEP's requests to intervene in regulatory proceedings of federal, state and local commissions and boards on issues pertinent to the Climate Challenge Program. Before DOE intervenes in regulatory and other proceedings pertaining to AEP for purposes of addressing Climate Challenge Program issues, it will provide notice to AEP.

C.

DOE will provide an annual report to AEP describing the actions that it has taken to fulfill its commitments under section III and Exhibit C of the Climate Challenge Program MOU and the results of those actions.

D.

The Climate Challenge Program representative for DOE, who will serve as liaison to AEP, will be:
Allan Hoffman
U.S. Department of Energy
Room 6B-128 (EE-10)
1000 Independence Avenue SW
Washington, DC 20585
202-586-1786
DOE agrees to notify DOE prior to or, in any event, no later than 30 days after any change in liaison responsibilities or personnel.

III. General Provisions

A.
Use of DOE-developed materials by AEP will be governed by the provisions of section IV of the Climate Challenge Program MOU, which are hereby incorporated in this Participation Accord by reference.

B.

In addition to the foregoing provisions, DOE and AEP agree to act in accordance with the principles set out in section I of the Climate Challenge Program MOU and the general provisions set out in subsections V.A-V.D, V.F. and V.G. of the Climate Challenge Program MOU, which are hereby incorporated by reference.

C.

Either party may withdraw from this Participation Accord or any of its activities under the Climate Challenge Program without penalty and without being subject to remedies at law or equity.

Secretary of Energy or designee Date
U.S. Department of Energy

Attachment:

Attachment A - Climate Challenge Program MOU and exhibits
Attachment B - Description of AEP Climate Challenge Plan

Supply-side Activities. The evaluation of on-going and potential future programs and activities in the supply-side area determined that emissions savings were occurring and would continue to occur in the areas of fossil plant heat rate improvements, use of natural gas in place of coal, hydroelectric generation life extension and efficiency improvements, nuclear plant availability and capacity increases and transmission and distribution system energy loss reductions. In the area of fossil plant heat rate improvement, a significant number of capital improvements or operational changes were identified that have already been undertaken since 1/1/91 or could potentially lead to improvements in individual unit heat rates. Examples of these activities include the use of adjustable speed drive motors for certain applications in the power plants, operating fossil units within a load range that optimizes heat rate while maintaining economic dispatch, reblading steam turbines to improve turbine efficiency, taking auxiliary equipment out of operation to reduce auxiliary power losses, and others. In addition, a target heat rate improvement level was established for the AEP System to be achieved by 2000. While many of these activities were occurring already, AEP will investigate other innovative ideas for improving fossil plant efficiency due to the attention given to the Climate Challenge program and the potential benefits of reducing CO₂ emissions.

AEP is converting three small coal units to natural gas-burning capability in 1995 in what is referred to as a "dual-firing" mode as an acid rain compliance measure. AEP will operate these units on natural gas when it is cost-effective to do so, factoring in the value of SO2 allowances. Based on projections in the compliance plan of the amount of generation expected from these units when on gas and the differential CO₂ emission rate of natural gas compared to coal, an estimate of emissions savings is included in the Climate plan.

The operation of AEP's conventional hydroelectric generation (16 facilities totaling 271 MW) avoided roughly 1 million tons of CO₂ in 1990. Many of these units are nearing the end of their expected operating lives. In addition, the turbines in many of the units are outdated and not as efficient as turbines available today. In the late 1980s and early 1990s, AEP undertook a program to increase the efficiency and extend the lives of its hydroelectric facilities. The program was expanded in 1994 due in part to the Climate Challenge. Without this program, much of the capacity would likely have been taken out of service before the year 2000. With the program, these units will remain in service, in some cases with increased capability. These measures have been included in the Climate Challenge plan, with a generation projection from the units based on a normal hydrological year and an emissions projection based on the assumption that the generation would come from coal-fired units on the AEP System if it does not come from the non-CO₂ emitting hydroelectric units.

AEP has two nuclear units as part of its system, totaling 2,110 MW. Since the early 1990s, an intensive program has been established to increase the availability of the AEP nuclear units by reducing the forced outage rates and decreasing the lengths of refueling outages. This program is consistent with efforts being undertaken throughout the industry to improve nuclear plant operations. AEP will continue to implement its strategic plan for the 2,110 MW nuclear plant. If the AEP program is successful, projected electric generation from the plant may increase as much as 40% compared to levels seen in 1990 and during many years in the 1980s. In addition, AEP's Nuclear Engineering Department is undertaking a project to increase the capability of one of the nuclear units by 60 MWe. Similar to the hydroelectric units, the emissions savings that will result from increased output from these units is based on the assumption that the generation would instead come from coal-fired units on the AEP System.

Potential emissions savings from activities on the transmission and distribution system fall into two categories. AEP has an active program of transmission line construction to meet the needs of its customers and to maintain the reliability of the transmission system in its geographical region of the country. In many cases, the addition of a new transmission line will allow energy to flow through the system more efficiently, thus reducing line losses. This directly translates to emissions savings as it results in less electricity being generated to meet a given customer demand. AEP's T&D Services Department also continually evaluates programs to reduce line losses for the existing transmission system. The combined effect of planned additions to the system and planned improvements in the system in the 1990-2000 timeframe have been included in the Climate plan and form part of AEP's commitments.

On the distribution side, AEP has an on-going program to upgrade the electrical equipment in its distribution system. A portion of this activity is planned maintenance to insure reliability of the system and a portion is unplanned in response to equipment failures. Much of the equipment being replaced has been in operation for many years. The replacement equipment tends to be more efficient due to improvements in technology, which will automatically result in a reduction in distribution losses. This translates into emissions savings on the same basis as for the transmission system. AEP will continue its distribution system maintenance program. The emissions savings calculation for the transmission and distribution system energy loss savings is based on an average CO₂ emission rate for the AEP System that factors in non-fossil generation with fossil-based generation.

• Project Good Turn refrigerator recycling program
  
• Targeted Energy Efficiency residential weatherization program
  
• Neighborhood Energy Watch residential weatherization program
  
• SMART Financing Program (commercial & industrial)
  TranstexT residential energy management system

The CO₂ emissions savings projected for the year 2000 from this level of effort were included in the final Climate Challenge plan. The emissions calculation is based on the assumption that the reduction in generation associated with the end-use energy efficiency improvement occurs at AEP fossil plants.

Land Management Activities. AEP has a long history of tree planting and land management programs. CO₂ savings can occur both from planting new trees and increasing forest stand productivity through aggressive land management techniques. Such efforts would continue even without the Climate Challenge program. However, the emphasis on CO₂ emissions brought about from participation in the Climate Challenge has resulted in a renewed focus on AEP's land management activities. As a result, both the tree planting and land management programs will be expanded between 1994 and 2000. Ultimately, AEP will plant up to 15 million new trees during this period, and bring 15,000 additional acres of existing forest lands under more aggressive management. All of these activities have been included in the Climate Challenge plan.

Miscellaneous. The AEP Climate Challenge plan includes three additional areas that hold the potential for CO₂ emissions savings. The first, U.S. EPA's Green Lights program, is in some respects a DSM program, but on AEP's side of the electric meter. AEP became a Green Lights utility ally in 1992, and is in the process of conducting lighting retrofits in its facilities. Under the current schedule, AEP will complete the lighting retrofit program in 1997. The energy savings projected to occur from this effort, reaching a peak of 47 million kwh/year in 1997, have been included in the plan. AEP is also an aggressive marketer of coal ash for use in commercial products. One of these uses, fly ash in place of cement in the manufacture of concrete products, can result in significant energy and emissions savings. AEP will continue to aggressively market coal by-products, and a fly ash utilization program has been included in the plan. Finally, AEP, as well as many other utilities, is developing an electrotechnologies marketing program to identify and promote the use of electric technologies to replace the direct use of fossil fuels. Many such technologies can result in an overall improvement in energy efficiency and reduction in emissions even though the generation of electricity increases. While the AEP Climate Challenge plan recognizes the role of electrotechnologies, an emission savings projection was not developed at this time.

-The Utility Forest Carbon Management Program

 	$5,000 initial commitment in 1994


- The Earth Comfort Geothermal Heat Pump Program

	$50,000/year for 5 years initial commitment in 1995


- Envirotech - The Electrotechnology and Renewable Energy Investment Pool

	Up to $5,000,000 initial commitment in 1995


- EV America

	Commitment to purchase EVs, number and cost unknown at this time

Emissions Savings Projection. The CO₂ emissions savings projection for the year 2000 from each of these program areas is:

	Supply-side activities		8.31 million tons

	Demand-side activities		0.78 million tons

	Land management & Misc.		0.46 million tons

		Total			9.55 million tons

Considerations. It is important to note the programs included in this Climate Challenge Participation Accord and the emissions savings projected to occur from implementation of these programs are based on the best projections available at the time the Accord goes into affect. Changing circumstances either within AEP or external to AEP could materially affect the actual emissions savings that will be achieved under this Climate Challenge Participation Accord.

Please send comments to:
Lawrence.Mansueti@hq.doe.gov